Agreement reached on Constellation Brands deal

Constellation Brands Inc., Anheuser-Busch InBev and Grupo Modelo S.A.B. de C.V. said Friday they have reached a final agreement with the U.S. Department of Justice on the terms of a settlement of the department’s litigation challenging AB InBev`s proposed acquisition of the remaining stake in Grupo Modelo it does not already own.

Under the agreement, Constellation Brands will become a fully independent beer competitor in the United States with perpetual rights for the Modelo brands sold by Crown Imports LLC and autonomous control of distribution, marketing, promotion and pricing, officials said.

Constellation Brands also will have full control of its production and supply chain, and have full rights to create line extensions and new brands to continue to drive the business, the Victor firm said.

"The Crown acquisition represents a significant milestone for Constellation as the most transformational event in the history of our 68-year-old company," said Robert Sands, president and CEO, in a statement. "Overall, this transaction will nearly double the sales of our company, significantly enhance our earnings and free cash flow, diversify our profit stream and provide new avenues for growth."

Analysts expect the deal to boost sales and profit this fiscal year, starting in the second quarter.

Analysts polled by Thomson Reuters expect year-over-years sales to rise 122 percent to $1.55 billion, versus $699 million the year before. They expect earnings per share to increase 28 percent, to 91 cents compared to 71 cents last year.

For the fiscal year, analysts polled by Thomson Reuters expect sales to grow 76 percent, from $2.8 billion to $4.93 billion. They expect earnings per share to increase 26 percent, from $2.19 to $2.76.

The companies and the Justice Department must still get court approval before the deal goes through.

Once finalized, AB InBev, Grupo Modelo and Constellation Brands will move forward with the deal. That includes an all-cash tender offer of $9.15 a share by AB InBev for all the outstanding Grupo Modelo and, and upon completion of the tender offer, the sale of Grupo Modelo`s Piedras Negras brewery to Constellation Brands and stake in Crown to Constellation Brands.

The purchase price for the combined transaction is $4.75 billion. It includes $1.85 billion for the remaining interest in Crown and $2.9 billion for the brewery and perpetual brand rights.

The Mexican Competition Commission approved the revised transaction with Constellation in early April. The transaction is expected to occur around the end of Constellation`s first quarter, which ends May 31.